Paypal Kills Christmas for Regretsy, Needy Families [Updated]

Just in time for the holidays, here's your Internet beef (it concerns charity this time): On one side, there's Paypal, your go-to method for paying for things online without using a credit card. On the other, there's Regretsy, the hilarious "fail blog of hand crafts." To get everyone up to speed: Regretsy set up a gift exchange where people could buy gifts for 200 needy kids. They raised more money than expected, and with the extra cash, planned to send a monetary gift to the families along with the presents. However, as Helen writes on Regretsy, they used the "Donate" button -- a no-no, apparently -- Paypal says it's only for nonprofits. So Paypal froze the account and is making her refund the donations.

When that happened, Helen came up with a work-around. She writes, "Since these toys are already purchased, I decided to offer them up for sale on this site, just like any other retailer would. You could buy them according to what you wanted to spend, and we would send them on to the recipient of your gift, just like any other retailer." That, too, was shut down by Paypal.

A phone call ensued -- Regretsy posts highlights from the conversation -- which ended in the Paypal representative telling Helen she had to "refund everything, write a letter saying you understood what you did WAS WRONG AND YOU WILL NEVER DO IT AGAIN, and then request permission to close your account."

Helen writes,

Then, for good measure, they froze my personal account, which has revenue from my book sales, e-books and all the other Finnish Folktales Swag. They'll be holding that money for 6 months.

So to recap:

$ They allowed me to use a donate button, and got a portion of the donations
$ Then made me return the donations, and kept a portion of the fees on the donations
$ They allowed me to use a Buy Now button to sell gifts individually, and got a portion of those sales
$ Then made me return the sales, and kept a portion of the fees on the sales
$ They processed the toy purchases, and made fees on that

They have made a fortune for not doing anything but making me manually return thousands of $2 sales and contributions.

I have been able to guarantee purchase and shipment of the toys, so that part is happening, as are the letters from Santa (most have already been delivered).

However, I am very sorry to say that at this point, I am not able to make a monetary gift to the families. They have frozen everything that was not already spent or donated, and I have no more funds to make a gift of that size.

MERRY CHRISTMAS

Interestingly, while the Daily Kos writes that Paypal's Facebook page has been flooded with comments from people irate over all of this, we don't see any -- has it been purged? [Ed: They're there -- click on "Everyone (Most Recent)" under the photos at the top -- thanks Doodle Bean!]

People are Tweeting about it, in any case:

We've contacted both Paypal and Regretsy for more info.

Update: Paypal has issued what some are calling a rather "half-assed" apology on their website. They write, "We can confirm that the funds have been released and we are working directly with the account holder on this matter. Just like anyone else, we believe strongly in helping those in need, especially around the holiday season. We are working with Regretsy to make a donation to help their cause, and we're truly sorry this occurred." Which sounds good.

They also write (a bit defensively, it seems): "We appreciate that this can be an inconvenience, but we have a responsibility to all our customers - both donors and recipients; and buyers and sellers. In this instance, we recognized our error and moved as swiftly as possible to fix it."

Update 2: Helen has an update on Regretsy as well. She writes, "In addition to an apology, Paypal has unfrozen both my personal account and my business account. It's a nice gesture, but I've already refunded thousands of dollars in donations, so they've basically just given me access to money that wasn't in issue to begin with. And they're refunded $77 without explanation, and I have no idea what that represents."

They have also offered me the opportunity of doing unlimited business without fees through the end of the year. It's really the only way I'd use them at this point, since they won't be getting anything from me."

Whether any of this drama means Paypal will be different, she doubts, but echoes a sensibility heard 'round the web: we got someone to pay attention.